tax issues if I do extra consultancy work outside my normal job

[MamaChocoholic]

A colleague and I have been offered a chance to do some consultancy work for another company. The initial piece of work is probably a couple of days, but if it goes well, there is the opportunity for quite a bit more. It would be paid as consultancy.

We both work full time now, and would continue to do so. What happens about tax? Does this count as self employment? Have had a look on HMRC website, but can't see anything about earning a bit extra on top of usual PAYE job, it all seems focused on people who work entirely for themselves.

Can anyone direct me to what I need to read and do?

yes register as self employed - do a tax return - won't be for ages -and use your P60 to fill in details from your PAYE job- loads of people do it - if going to be under a certain amount about 5000 pound you can apply for exception for NI in the self employed work

thanks. do you only pay ni on the self employed work for the weeks you don't do any work? not sure how it will work yet, but we might get a week's work now, then nothing for another few months. would I need to pay extra ni for all those in between weeks too?

Mama I've been combining a number of PAYE jobs with self-employment for a while - you will need to register as a sole trader or partnership with the HMRC, but you won't need to make additional NI contributions as you are already paying through your employer.

If you are currently taxed at basic rate, then additional earnings might take you into the higher rate tax bracket so you'll pay 40% tax on any profit that is over that threshold (£34,370, this year) - but remember to keep a record of all the expenses you incur in relation to your self-employment - insurance (I've mentioned this below), travel, phone calls etc. You can offset some of these against profit as business expenses when you declare your earnings. The HMRC has pages of info on the different allowances for business expenses - mileage, use of your home as an office etc.

In terms of timing, you can be fined if you don't register as self-employed within three months of starting to "trade". The first tax return/payment that you have to complete will be by the end of the January following the tax year in which you start trading, so if you register now, in the 2012/13 tax year, then you won't have to pay until the Jan 2014 deadline. But, the payment you make then will be all the the tax you owe for the 2012/13 year, plus 50%, as a part-payment on the 2014/15 year, if you see what I mean! Details from your P60, P11D and/or P9D from your employer will also have to be included.

As an aside, other things I had to consider was my T & C's of employment (some employers have clauses preventing employees moonlighting in the same sector, or require that you notify them if you do a second job), and more importantly, I have had to organise and pay for my own public liability insurance for the self-employed work I do - but this is a business expense, so offset against profit.

Thanks NADM, very useful.